Your very first step in the process is to study the state landlord tenant regulations in each state and determine which is the most landlord friendly.

Personally, I don't think I have what it takes to manage this type of risk, and for me this will probably mean staying out of an asset class which would probably be most impacted by this type of regulation... i.e.

"If you let it foreclose, you get nothing" ..and im sure the local HUD office would love to hear that he's collecting government subsidized housing payments while letting the house go into foreclosure.  

@William Brown It all depends on your local government.

Each state is different and you must know the laws governing within state. 

If banks treat duplexes as single family homes, I wouldn't be surprised if the government does the same.

True, there's no avoiding the headaches of local government, but if I can avoid putting up with another layer of bureaucracy, I'm going to.

After so many threads on this site, regulators posting, attorneys speaking and preaching the law concerning wholesaling, anyone at this point must have a screw lose to continue down this road.

That is what governs your relationship. 

Most banks have federal regulators or are in a correspondent banking relationship with nationally chartered banks.